[Yonhap News Photo]
SEOUL, Feb. 23 (Aju News) -- GM Korea's board dropped a vote Friday on whether to recall or extend the maturity of loans as South Korean financial officials are reluctant to extend a bailout without a viable self-rescue package aimed at keeping its operation afloat.
As a result, GM Korea's main factory west of Seoul will not be set as a collateral, according to company officials. The board's move means there will be no action pending a due diligence study.
GM Executive Vice President Barry Engle held a series of meetings with policymakers in Seoul this week on how to rescue the South Korean subsidiary of the Detroit-based carmaker, which has decided to shut down a plant in the southwestern port city of Gunsan by the end of May.
GM has offered to convert 2.7 billion US dollars in debt owed by its South Korean operation into equity in exchange for financial support as well as tax and other benefits. It also proposed a new $2.8 billion investment plan for the next 10 years.
South Korean officials have insisted on looking into GM Korea's financial situation before deciding on any possible bailout. The state-run Korea Development Bank, which holds a 17-percent stake in GM Korea, is reluctant to endorse a debt-equity swap, insisting GM should take its responsibility for poor management.
A contentious issue which has hampered negotiations was the debt GM Korea borrowed from its headquarters and affiliates at a rate of up to 5.3 percent. When the maturity of 1.1 trillion won expired at the end of last year, GM recalled 400 billion won and the maturity of 700 billion won which expires at the end of this month.
Engle said earlier that GM would decide soon whether to maintain a production capacity of 500,000 units at its plants in South Korea by allocating two new vehicles. In South Korea, GM runs four car assembly plants and one transmission factory since it acquired Daewoo Motor in 2002.
GM's decision on February 13 to close the plant in Gunsan as part of the restructuring of its global business triggered widespread concerns in the regional community. The Gunsan plant has some 2,000 workers and 12,000 others employed at suppliers and subcontractors.
GM Korea, the third-largest carmaker in South Korea, has been hit by falling sales as well as rising costs and debt. GM officials have complained about excessive demands and labor activities by unionized workers.
reporter
Lim Chang-won
cwlim34@ajunews.com
